Budget 2016: Coal cess in line with India’s climate commitments

Coal consumers like Tata Steel opposed the increase in the cess, but analysts said the steps are in line with India’s climate commitments.Kaavya Chandrasekaran&Debjoy Sengupta | ET Bureau | March 01, 2016, 08:06 IST

Union Budget 2016NEW DELHI/KOLKATA: Clean energy tariffs will rise by 15-20 paise due to Budget proposals, but doubling of the green tax on coal to Rs 400 per tonne will help clean energy narrow the gap with conventional power.

Finance minister Arun Jaitley has proposed phase-out of tax concessions to commissioned projects under Section 80-IA of the Income Tax Act, raising costs of power firms. Another proposal that has raised concerns is tax on large dividends. Coal India received a dividend of Rs 13,000 crore from its subsidiaries last year.

Coal consumers like Tata Steel opposed the increase in the cess, but analysts said the steps are in line with India’s climate commitments.

“However, in the immediate future it puts huge stress on distribution company finances as they would struggle to pass this in consumer tariff. Government could have waited for UDAY to fully take effect,” he said.

The budget also halved accelerated depreciation (AD) benefits to 40%, which evoked a mixed response from industry.

“Of the 3000 MW or so of wind energy added last year, only 500-600 MW have taken advantage of AD benefit,” said Hero Future Energies CEO Sunil Jain who is also president of Wind Independent Power Producers Association in India.

Suzlon chairman Tulsi Tanti, however, said, “We wish to reiterate that accelerated depreciation limit of 80% should continue till 2022, aligned to the government target of 175GW renewables by 2022 and to boost manufacturing under the Make in India vision.”

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The ongoing field development and EOR/IOR projects are expected to produce a cumulative of 54.6 million tonne (mt) of crude oil and 114 billion cubic meter (bcm) of natural gas in the next three to four years, the report said.